Gold Outlook Following Trump Win

Source: Clive Maund 11/11/2024

Technical Analyst Clive Maund shares his opinion on gold’s outlook post Trump’s election win.

The reason that the stock market soared and gold and silver dropped on Trump winning the election by a decisive margin is simple. Trump had made it plain in the past that he wants low and even negative interest rates.

Why? While terrible for the economy, very low interest rates mean that the can can be kicked even further down the road. They mean that the Fed can spirit (counterfeit) still more trillions of dollars into existence, which it can use to stabilize the currently very unstable and saturated debt market and thus pump the stock market even more and also use to continue its program of buying up assets across the board, and the public will later get stuck with the bill via much higher inflation and a consequent reduced standard of living. So we see that the Fed is essentially a wealth transfer engine whose job is to transfer the wealth from the lower and middle classes up to the 1 and 2% at the top of the pyramid, which it does via the mechanism of rampant money creation and inflation. Trump himself is The Master of portraying himself as the champion of the ordinary man in the street when, in reality, he is working on transferring whatever assets he has to the ruling elite at the top.

What all this means is that, for a while at least, and perhaps for quite a while, we are going back to a “risk on” environment in which rates are suppressed, allowing stock markets and other risk assets to continue to inflate. In this environment, hard assets tend to get sidelined because funds are pulled to play risk assets, although we are now at such a late stage in the game that this cannot continue for very long because of the huge inflationary pressures building up due to all the money creation. The upshot of this is that hard assets like gold and silver could be neglected and suffer a correction, but after that, they will come back strong as inflation mounts further. We have long been of the view that those in power favor a trend in the direction of hyperinflation rather than a debt crisis and implosion of the system because this enables them to continue to plunder assets on a massive scale before the system flies apart.

So, gold and silver dropped hard on Trump’s decisive election victory, and on gold’s latest year-to-date chart, we can see that the big drop broke it down from the uptrend that had been in force from July, opening up the possibility that it will correct back, perhaps as far as the support above its rising 200-day moving average in the $2400 – $2450 zone.

Overall, though, this is a decidedly strong chart with moving averages in very bullish alignment, so it may not correct back that far — one possibility is that it runs off sideways into a trading range for a while. Any significant reaction will be regarded as a buying opportunity. Gold bounced quite strongly yesterday because it had dropped to touch its rising 50-day moving average, but this won’t stop it from dropping further as the high volume breakdown from the intermediate uptrend is viewed as signaling the onset of a correction.

So, in conclusion, a period of consolidation or correction looks likely, with any significant correction viewed as presenting a major sector-wide buying opportunity.

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Clivemaund.com Disclosures

The above represents the opinion and analysis of Mr. Maund, based on data available to him, at the time of writing. Mr. Maund’s opinions are his own, and are not a recommendation or an offer to buy or sell securities. As trading and investing in any financial markets may involve serious risk of loss, Mr. Maund recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction, and do your own due diligence and research when making any kind of a transaction with financial ramifications. Although a qualified and experienced stock market analyst, Clive Maund is not a Registered Securities Advisor. Therefore Mr. Maund’s opinions on the market and stocks cannot be construed as a recommendation or solicitation to buy and sell securities.